ENVA US Equity☆

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

RECENT REGULATORY DEVELOPMENTS

Consumer Financial Protection Bureau (“CFPB”)

On May 24, 2021, we received a Civil Investigative Demand (“CID”) from the CFPB concerning certain loan processing issues. We cooperated fully with the CFPB and provided all requested data and information in response to the CID. We anticipate being able to expeditiously complete the investigation as several of the issues were self‐disclosed and we have provided restitution to customers who may have been negatively impacted. We received a second CID in April 2022 requesting additional information. We have provided all requested information in response to the CID.

On October 6, 2017, the CFPB issued its final rule entitled “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (the “Small Dollar Rule”), which covers certain consumer loans that we offer. The Small Dollar Rule requires that lenders who make short-term loans and longer-term loans with balloon payments reasonably determine consumers’ ability to repay the loans according to their terms before issuing the loans. The Small Dollar Rule also introduces new limitations on repayment processes for those lenders as well as lenders of other longer-term loans with an annual percentage rate greater than 36 percent that include an ACH authorization or similar payment provision. If a consumer has two consecutive failed payment attempts, the lender must obtain the consumer’s new and specific authorization to make further withdrawals from the consumer’s bank account. For loans covered by the Small Dollar Rule, lenders must provide certain notices to consumers before attempting a first payment withdrawal or an unusual withdrawal and after two consecutive failed withdrawal attempts. On June 7, 2019, the CFPB issued a final rule to set the compliance date for the mandatory underwriting provisions of the Small Dollar Rule to November 19, 2020. On July 7, 2020, the CFPB issued a final rule rescinding the ability to repay (“ATR”) provisions of the Small Dollar Rule along with related provisions, such as the establishment of registered information systems for checking ATR and reporting loan activity. The payment provisions of the Small Dollar Rule remain in place. In April 2018, an action was filed against the CFPB making a constitutional challenge to the Small Dollar Rule. On October 19, 2022, a three-judge panel of the Fifth Circuit U.S. Circuit Court of Appeals ruled that the funding structure of the CFPB is unconstitutional and vacated the Small Dollar Rule. On November 14, 2022, the CFPB filed a Petition for Writ of Certiorari with the U.S. Supreme Court to review the Fifth Circuit ruling. On January 13, 2023, the Brief in Opposition to the Petition for writ was filed. If the Small Dollar Rule does become effective in its current proposed form, we will need to make certain changes to our payment processes and customer notifications in our U.S. consumer lending business.

Illinois SB 1792

On March 23, 2021, the Economic Equity Act (“EEA”) became effective in Illinois. The EEA implements a 36% rate cap on all consumer lending, with the APR calculated consistent with the Military Lending Act’s Military Annual Percentage Rate. The EEA applies to consumer loans originated on or after the effective date. In addition, the EEA provides for the application of a predominant economic interest test for bank service arrangements. Pursuant to the predominant economic interest test, a broker or service with a predominant economic interest in a loan is considered to be the “true lender” for purposes of applying the EEA and the 36% rate cap.

New Mexico HB 132

On February 15, 2022, the New Mexico Legislature passed HB 132. The bill imposes a 36% rate cap on loans up to $10,000. Additionally, HB 132 provides for the application of a predominant economic interest test for bank service arrangements whereby a broker or servicer with a predominant economic interest in a loan is considered to be the “true lender” for purposes of applying the 36% rate cap. The New Mexico Governor signed the bill into law on March 1, 2022. The law took effect on January 1, 2023.

Brazil General Data Privacy Law

On August 14, 2018, Brazil adopted the General Data Privacy Law (Lei Geral de Proteção de Dados Pessoais or “LGPD”). The key provisions of LGPD are quite similar to the European Union’s General Data Protection Regulation (“GDPR”) in that it grants certain rights to data subjects, imposes obligations on companies with regard to the processing of data, and allows authorities to impose substantial fines on companies that violate the law. LGPD was originally anticipated to go into effect on February 15, 2020; however, several amendments to LGPD delayed the effective date. LGPD took effect on September 18, 2020, and enforcement of the penalties and sanctions for non-compliance began August 1, 2021. Compliance with LGPD may increase the cost of conducting business in Brazil, and we could see regulatory compliance costs and enforcement activity now that the law is in effect.

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RESULTS OF OPERATIONS

Highlights

Our financial results for the year ended December 31, 2022 (“2022”) are summarized below.

•

Revenue increased $528.2 million, or 43.7%, to $1,736.1 million in 2022 compared to $1,207.9 million in the year ended December 31, 2021 (“2021”).

•

Net revenue increased $93.3 million, or 9.1%, to $1,117.6 million in 2022 compared to $1,024.3 million in 2021.

•

Income from Operations decreased $29.1 million, or 7.0%, to $384.0 million in 2022, compared to $413.1 million in 2021.

•

Net income was $207.4 million in 2022, compared to $256.3 million in 2021. Diluted earnings per share were $6.19 in 2022 compared to $6.79 in 2021.

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Overview

The following tables reflect our results of operations for the periods indicated, both in dollars and as a percentage of total revenue (dollars in thousands, except per share data):

Year Ended December 31,

Revenue

Operating Expenses

Foreign currency transaction (loss) gain, net (645 ) (382 ) 514

Gain on bargain purchase — — 163,999

Less: Net income attributable to noncontrolling interest — 773 85

Net loss from discontinued operations — — (300 )

Diluted earnings per share – continuing operations $ 6.19 $ 6.79 $ 11.71

Diluted loss per share – discontinued operations — — (0.01 )

Revenue

Loans and finance receivables revenue 98.7 % 98.7 % 99.3 %

Operating Expenses

Depreciation and amortization 2.1 2.9 1.8

Interest expense, net (6.7 ) (6.3 ) (8.0 )

Foreign currency transaction (loss) gain, net — — 0.1

Gain on bargain purchase — — 15.1

Equity method investment income 0.4 0.2 0.1

Other nonoperating expenses (0.1 ) (0.2 ) (0.1 )

Provision for income taxes 3.8 6.6 5.3

Less: Net income attributable to noncontrolling interest — 0.1 —

Net income from continuing operations 11.9 21.2 34.9

Net loss from discontinued operations — — —

Net income attributable to Enova International, Inc. 11.9 % 21.2 % 34.9 %

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Valuation of Loans and Finance Receivables

The COVID-19 pandemic severely impacted global economic conditions, resulting in substantial volatility in the financial markets, increased unemployment, and operational challenges resulting from measures that governments imposed to control its spread. We actively worked with our customers to understand their financial situations, waived late fees, offered a variety of repayment options to increase flexibility and reduced or deferred payments for impacted customers. We took measures to adjust our underwriting procedures, which reduced exposure to more heavily impacted consumers and businesses. Certain of these measures eased since the height of the pandemic, with improvement of economic conditions and our outlook.

From a loan valuation perspective, at the onset of the COVID-19 pandemic in the first quarter of 2020, we deemed it appropriate to increase the discount rates used in our internally-developed valuation models, thereby lowering loan fair values, to capture the increase in potential volatility in expected cash flows due to the unprecedented nature of the pandemic and governmental response. These rates remained consistent for the remainder of 2020. Over the course of 2021, we noted a tightening of credit spreads in observable pricing in the market; as such, we reduced the discount rates used in our valuations. As of December 31, 2021, our discount rates had generally returned to the levels utilized immediately prior to the pandemic. Over the course of 2022, we increased our discount rates based primarily on movements in the market. We believe the adjustments to our discount rates to be responsive to changes in the market and representative of what a market participant would use.

After seeing increases in delinquency and charge-offs early in the pandemic, we experienced significant improvements to these metrics over the remainder of 2020 and into 2021. The U.S. government provided multiple rounds of stimulus assistance to taxpayers and businesses. Positive COVID-19 test counts as well as the severity of related symptoms have generally decreased across 2021 and 2022, although there have been spikes as different variants escalate and abate. In 2022, views in the marketplace on the economy and its near-term prospects remain mixed with concerns on employment, inflation, and other macroeconomic trends. In certain situations, management concluded that the probability of future charge-offs was higher than what we had experienced in the past and, therefore, increased anticipated charge-offs in our fair value models. We continue to utilize this approach and have adjusted charge-off expectations where appropriate. As of December 31, 2022, we deemed the resulting fair value to be an appropriate market-based exit price that considers current market conditions.

NON-GAAP FINANCIAL MEASURES

In addition to the financial information prepared in conformity with generally accepted accounting principles (“GAAP”), we provide historical non-GAAP financial information. We believe that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of our operations. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of our business that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business.

We provide non-GAAP financial information for informational purposes and to enhance understanding of our GAAP consolidated financial statements. Readers should consider the information in addition to, but not instead of or superior to, our consolidated financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.

Adjusted Earnings Measures

In addition to reporting financial results in accordance with GAAP, we have provided adjusted earnings and adjusted earnings per share, or, collectively, the Adjusted Earnings Measures, which are non-GAAP measures. We believe that the presentation of these measures provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures, compensation strategies, derivative instruments and amortization methods, which provides a more complete understanding of our financial performance, competitive position and prospects for the future. We also believe that investors regularly rely on non-GAAP financial measures, such as the Adjusted Earnings Measures, to assess operating performance and that such measures may highlight trends in our business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. In addition, we believe that the adjustments shown below are useful to investors in order to allow them to compare our financial results during the periods shown without the effect of each of these income or expense items.

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The following table provides reconciliations between net income and diluted earnings per share calculated in accordance with GAAP to the Adjusted Earnings Measures (in thousands, except per share data):

Year Ended December 31,

Adjustments:

Gain on bargain purchase — — (163,999 )

Lease termination and cease use loss(b) — 7,535 —

Equity method investment income(c) (6,107 ) — —

Foreign currency transaction loss (gain), net(e) 645 372 (499 )

Cumulative tax effect of adjustments (5,365 ) (9,855 ) (8,038 )

Discrete tax adjustments(f) — — (11,604 )

Diluted earnings per share from continuing operations $ 6.19 $ 6.79 $ 11.71

Adjustments:

Gain on bargain purchase — — (5.08 )

Transaction-related costs(a) — 0.04 0.62

Lease termination and cease use loss(b) — 0.20 —

Equity method investment income(c) (0.18 ) — —

Stock-based compensation expense 0.66 0.56 0.56

Foreign currency transaction loss (gain), net(e) 0.02 0.01 (0.02 )

Cumulative tax effect of adjustments (0.16 ) (0.26 ) (0.25 )

Discrete tax adjustments(f) — — (0.36 )

Adjusted earnings per share $ 6.81 $ 7.57 $ 7.26

(a)

For the years ended December 31, 2021 and 2020, we recorded expenses of $1.4 million ($1.1 million net of tax) and $20.0 million ($19.5 million net of tax), respectively, related to acquisitions and a divestiture of a subsidiary.

(b)

For the year ended December 31, 2021, we recorded losses of $7.5 million ($5.6 million net of tax), including a net write-off of leasehold improvements of $4.2 million).

(c)

For the year ended 2022, we recorded equity method investment income of $6.3 million ($3.6 million net of tax) that was comprised primarily of an $11.0 million gain generated on the sale by Linear, in which we hold an ownership interest, of its operating company, partially offset by a $4.4 million loss on the sale of OnDeck Canada.

(d)

For the years ended December 31, 2022 and December 31, 2021, we recorded a loss of $1.3 million ($1.0 million net of tax) and $0.8 million ($0.6 million net of tax), respectively, related to incomplete capital markets transactions. For the year ended December 31, 2021, we recorded a loss of $0.8 million ($0.6 million net of tax) related to the partial divestiture of a subsidiary. For the years ended December 31, 2021 and 2020, we recorded losses on early extinguishment of debt of $0.4 million ($0.3 million net of tax) and $0.8 million ($0.6 million net of tax), respectively.

(e)

Excludes amounts attributable to noncontrolling interests.

(f)

For the year ended December 31, 2020, we recorded income tax benefits of $11.6 million resulting from the remeasurement of our liability for certain previously unrecognized tax benefits.

Adjusted EBITDA

The table below shows Adjusted EBITDA, which is a non-GAAP measure that we define as earnings excluding depreciation, amortization, interest, foreign currency transaction gains or losses, taxes and stock-based compensation expense. We believe Adjusted EBITDA is used by investors to analyze operating performance and evaluate our ability to incur and service debt and our capacity for making capital expenditures. Adjusted EBITDA is also useful to investors to help assess our estimated enterprise value. In addition, we believe that the adjustments for transaction-related costs, lease termination and cease use (gain) loss, gain on bargain purchase, equity method investment income, and other nonoperating expenses shown below are useful to investors in order to allow them to compare our

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financial results during the periods shown without the effect of the income or expense items. The computation of Adjusted EBITDA as presented below may differ from the computation of similarly-titled measures provided by other companies (dollars in thousands):

Year Ended December 31,

Foreign currency transaction loss (gain), net(e) 645 372 (499 )

Adjustments:

Lease termination and cease use loss(b) — 3,336 —

Gain on bargain purchase — — (163,999 )

Equity method investment income (6,435 ) (2,953 ) (628 )

Adjusted EBITDA margin calculated as follows:

Adjusted EBITDA as a percentage of total revenue 25.5 % 39.2 % 38.3 %

Refer to footnotes in previous table for explanation of (a), (b), (d) and (e).

Combined Loans and Finance Receivables

Combined loans and finance receivables is a non-GAAP measure that includes both loans and RPAs we own and loans we guarantee, which are either GAAP items or disclosures required by GAAP. We believe this non-GAAP measure provides investors with important information needed to evaluate the magnitude of potential receivable losses and the opportunity for revenue performance of the loans and finance receivables portfolio on an aggregate basis. We also believe that the comparison of the aggregate amounts from period to period is more meaningful than comparing only the amounts reflected on our consolidated balance sheets since both revenue and cost of revenue are impacted by the aggregate amount of receivables we own and those we guarantee as reflected in our consolidated financial statements.

YEAR ENDED 2022 COMPARED TO YEAR ENDED 2021

Revenue and Net Revenue

Revenue increased $528.2 million, or 43.7%, to $1,736.1 million for 2022 as compared to $1,207.9 million for 2021. The change in revenue was driven primarily by a 71.9% increase in revenue from our small business portfolio and a 30.6% increase in revenue from our consumer portfolio as higher levels of originations in 2021 and 2022 led to higher loan balances for both portfolios.

Our net revenue was $1,117.6 million for 2022 compared to $1,024.3 million for 2021. Our net revenue as a percentage of revenue (“net revenue margin”) was 64.4% in 2022 compared to 84.8% in 2021. The net revenue margin in the prior year was elevated due primarily to lower delinquency rates and lower than expected charge-offs as a result of portfolio seasoning and lower originations. As originations increased across the second half of 2021 and through 2022, the delinquency rates and charge-offs increased, resulting in net revenue margin for 2022 being within a more normal range.

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The following table sets forth the components of revenue and net revenue, separated by product for 2022 and 2021 (dollars in thousands):

Year Ended December 31,

Revenue by product:

Revenue by product (% to total):

Consumer loans and finance receivables revenue 61.4 % 67.5 %

Small business loans and finance receivables revenue 37.3 31.2

Total loan and finance receivable revenue 98.7 98.7

Change in fair value (35.6 ) (15.2 )

The percentage of revenue from our small business loans and finance receivables increased in 2022 as we placed more emphasis on this portion of our overall portfolio based on strength in demand, credit metrics and outlook.

Loan and Finance Receivable Balances

The fair value of our loan and finance receivable portfolio in our consolidated financial statements at December 31, 2022 and 2021 was $3,018.5 million and $1,964.7 million, respectively, with an outstanding principal balance of $2,739.2 million and $1,878.4 million, respectively. The fair value of the combined loan and finance receivables portfolio includes $16.3 million with an outstanding principal balance of $12.9 million and $18.8 million with an outstanding principal balance of $11.8 million of consumer loan balances that are guaranteed by us but not owned by us, which are not included in our consolidated financial statements as of December 31, 2022 and 2021, respectively. See “—Non-GAAP Financial Measures—Combined Loans and Finance Receivables” above for additional information related to combined loans and finance receivables.

The following table summarizes loan and finance receivable balances outstanding as of December 31, 2022 and 2021 (in thousands):

As of December 31,

Guaranteed Guaranteed

Company by the Company by the

Owned(a) Company(a) Combined(b) Owned(a) Company(a) Combined(b)

Consumer loans and finance receivables

Small business loans and finance receivables

Total loans and finance receivables

(a)

GAAP measure. The loan and finance receivable balances guaranteed by us relate to loans originated by third-party lenders through the CSO programs and are not included in our consolidated balance sheets.

(b)

Amounts represent non-GAAP measures.

At December 31, 2022, the ratio of fair value as a percentage of principal was 110.2% on company owned loans and finance receivables and 110.3% on combined loans and finance receivables compared to 104.6% on company owned loans and finance receivables and 104.9% on combined loans and finance receivables at December 31, 2021. These ratios increased during the year due primarily to a mix

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shift towards line of credit products, which generally have a higher fair value as a percentage of principal compared to installment loans, as well as an improvement in credit outlook on certain products, partially offset by higher delinquency rates on certain products.

Average Amount Outstanding per Loan and Finance Receivable

The average amount outstanding per loan and finance receivable is calculated as the total combined loans and finance receivables, gross balance at the end of the period divided by the total number of combined loans and finance receivables outstanding at the end of the period. The following table shows the average amount outstanding per loan and finance receivable by product at December 31, 2022 and 2021:

As of December 31,

Average amount outstanding per loan and finance receivable (in ones)(a)

Consumer loans and finance receivables(b) $ 2,089 $ 1,953

Small business loans and finance receivables 39,021 38,125

(a)

The disclosure regarding the average amount per loan is statistical data that is not included in our consolidated financial statements.

(b)

Includes loans guaranteed by us, which represent loans originated by third-party lenders through the CSO programs and are not included in our consolidated balance sheets.

The average amount outstanding per loan increased to $5,172 as of December 31, 2022 compared to $3,849 from prior year, mainly due to an increase in the mix of loans and finance receivables held by small businesses in our portfolio, which are larger on average than our consumer portfolio.

Average Loan and Finance Receivable Origination

The average loan and finance receivable origination amount is calculated as the total amount of combined loans and finance receivables originated, renewed and purchased for the period divided by the total number of combined loans and finance receivables originated, renewed and purchased for the period. The following table shows the average loan and finance receivable origination amount by product for 2022 compared to 2021:

Year Ended

December 31,

Average loan and finance receivable origination amount (in ones)(a)

Consumer loans and finance receivables(b)(c) $ 665 $ 648

Small business loans and finance receivables(c) 17,193 15,703

(a)

The disclosure regarding the average loan origination amount is statistical data that is not included in our consolidated financial statements.

(b)

Includes loans guaranteed by us, which represent loans originated by third-party lenders through the CSO programs and are not included in our consolidated balance sheets.

(c)

For line of credit accounts the average represents the average amount of each incremental draw.

The average loan origination amount increased to $1,823 from $1,419 during 2022 compared to 2021, due primarily to an increase in the mix of higher dollar amount loans and finance receivables to small businesses and, to a lesser extent, the gradual easing of restrictions on loan amounts as risks from the COVID-19 pandemic abated.

Credit Performance of Loans and Finance Receivables

We monitor the performance of our loans and finance receivables. Internal factors such as portfolio composition (e.g., interest rate, loan term, geography information, customer mix, credit quality) and performance (e.g., delinquency, loss trends, prepayment rates) are reviewed on a regular basis at various levels (e.g., product, vintage). We also weigh the impact of relevant, internal business decisions on portfolio. External factors such as macroeconomic trends, financial market liquidity expectations, competitive landscape and legal/regulatory requirements are also reviewed on a regular basis.

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The payment status of a customer, including the degree of any delinquency, is a significant factor in determining estimated charge-offs in the cash flow models that we use to determine fair value. The following table shows payment status on outstanding principal, interest and fees as of the end of each of the last eight quarters (dollars in thousands):

First Second Third Fourth

Quarter Quarter Quarter Quarter

First Second Third Fourth

Quarter Quarter Quarter Quarter

(a)

Represents loans originated by third-party lenders through the CSO programs, which are not included in our consolidated financial statements.

(b)

Non-GAAP measure.

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Refer to the following sections for discussion of receivable balances and credit metrics at the consumer and small business levels.

Consumer Loans and Finance Receivables

The following table includes financial information for our consumer loans and finance receivables. Delinquency metrics include principal, interest and fees, and only amounts that are past due (dollars in thousands):

First Second Third Fourth

Quarter Quarter Quarter Quarter

Consumer loans and finance receivables:

Consumer combined loan and finance receivable principal balance:

Consumer combined loan and finance receivable fair value balance:

Delinquencies:

Charge-offs:

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First Second Third Fourth

Quarter Quarter Quarter Quarter

Consumer loans and finance receivables:

Consumer combined loan and finance receivable principal balance:

Consumer combined loan and finance receivable fair value balance:

Delinquencies:

Charge-offs:

(a)

Represents loans originated by third-party lenders through the CSO programs that we have not yet purchased, which are not included in our consolidated balance sheets.

(b)

Non-GAAP measure.

(c)

Determined using period-end balances.

(d)

The average combined loan and finance receivable balance is the average of the month-end balances during the period.

The combined ending loan balance, including principal and accrued fees/interest outstanding, of consumer loans and finance receivables at December 31, 2022 increased 12.2% to $1,056.2 million compared to $941.4 million at December 31, 2021, due primarily to the acceleration in originations beginning approximately mid-2021, following the strategic reduction in originations at the onset of the COVID-19 pandemic in early 2020 to mitigate risks associated with the pandemic.

The percentage of loans greater than 30 days delinquent increased to 8.2% at December 31, 2022, compared to 6.3% at December 31, 2021. The increase was driven primarily by a mix shift towards line of credit products, which generally have higher interest rates and fees due to the higher risk of default.

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Charge-offs (net of recoveries) as a percentage of average combined loan balance increased to 16.3% for the three months ended December 31, 2022 (the “2022 fourth quarter”), compared to 13.3% for the three months ended December 31, 2021 (the “2021 fourth quarter”), driven primarily by growth in originations on line of credit products, particularly to new customers, which typically default at a higher percentage than returning customers.

The ratio of fair value as a percentage of principal on consumer loans and finance receivables increased to 112.3% at December 31, 2022, compared to 103.3% at December 31, 2021, due primarily to a mix shift towards line of credit products, which generally have a higher fair value as a percentage of principal compared to installment loans.

Refer to “Results of Operations—Valuation of Loans and Finance Receivables” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional discussion on loan valuation, including the discount rate assumption.

Small Business Loans and Finance Receivables

The following table includes financial information for our small business loans and finance receivables. Delinquency metrics include principal, interest and fees, and only amounts that are past due (dollars in thousands):

First Second Third Fourth

Quarter Quarter Quarter Quarter

Small business loans and finance receivables:

Delinquencies:

> 30 days delinquent as a % of loan balance(a) 3.6 % 3.6 % 4.4 % 5.7 %

Charge-offs:

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First Second Third Fourth

Quarter Quarter Quarter Quarter

Small business loans and finance receivables:

Delinquencies:

> 30 days delinquent as a % of loan balance(a) 10.2 % 7.1 % 5.1 % 4.3 %

Charge-offs:

(a)

Determined using period-end balances.

(b)

The average loan and finance receivable balance is the average of the month-end balances during the period.

The combined ending loan balance, including principal and accrued fees/interest outstanding, of small business loans and finance receivables at December 31, 2022 increased 76.8% to $1,797.3 million compared to $1,016.6 million at December 31, 2021, due primarily to strong originations in the year.

The percentage of loans and finance receivables greater than 30 days delinquent increased to 5.7% at December 31, 2022, compared to 4.3% at December 31, 2021. Charge-offs (net of recoveries) as a percentage of average loan balance increased to 4.1% for the 2022 fourth quarter, compared to 0.8% in the 2021 fourth quarter. The credit performance of our small business portfolio was stronger in 2021 when compared to the pre-COVID-19 period as the portfolio was more seasoned due to reductions in originations in response to the pandemic. Delinquency and charge-offs have risen across 2022 to more normal levels due to the acceleration in originations and macroeconomic pressures on our customers and their businesses.

The ratio of fair value as a percentage of principal on small business loans and finance receivables increased to 109.1% at December 31, 2022, compared to 106.3% at December 31, 2021, due primarily to the strong credit performance of our line of credit products.

Refer to “Results of Operations—Valuation of Loans and Finance Receivables” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional discussion on loan valuation, including the discount rate assumption.

Total Expenses

Total operating expenses increased $122.4 million, or 20.0%, to $733.6 million in 2022, compared to $611.2 million in 2021.

Marketing expense increased $111.4 million, or 41.1%, to $382.5 million in 2022 compared to $271.1 million in 2021, due primarily to our efforts to capture increasing market demand for loan products in the current year. The prior year, particularly the first half, was abnormally low due to our strategic actions to mitigate risks associated with the COVID-19 pandemic. Certain marketing costs, such as commissions paid to third-party lead providers, are variable and increase as originations increase.

Operations and technology expense increased $26.0 million, or 17.6%, to $173.7 million in 2022 from $147.7 million in 2021, due primarily to higher variable costs, particularly personnel and underwriting, due to the increase in originations and the size of the loan portfolio. As a percentage of revenue, operations and technology expense decreased to 10.0% in 2022 from 12.2% in 2021, as increased originations and revenues outpaced fixed costs.

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General and administrative expense decreased $16.5 million, or 10.5%, to $140.5 million in 2022 compared to $157.0 million in 2021, due primarily to synergies achieved following the October 2020 acquisition of OnDeck. As a percentage of revenue, general and administrative expense decreased to 8.1% in 2022 from 13.0% in 2021, as increased originations and revenues outpaced fixed costs.

Depreciation and amortization expense increased $1.5 million, or 4.2%, to $36.9 million in 2022 compared to $35.4 million in 2021 driven primarily by additional internally-developed software placed into service and fixed assets and intangible assets acquired with Pangea.

Nonoperating Items

Interest expense, net increased $39.4 million, or 51.5%, to $115.9 million in 2022 compared to $76.5 million in 2021, due primarily to an increase in the average amount of debt outstanding to $1,856.1 million during 2022 from $1,036.2 million during 2021, partially offset by a decrease in the weighted average interest rate on our outstanding debt to 6.35% in 2022 from 7.34% in 2021. See “—Liquidity and Capital Resources—Current Debt Facilities” below for further information.

Provision for Income Taxes

The effective tax rate from continuing operations of 23.9% in 2022 was consistent with the 23.8% rate in 2021. The 2022 rate was primarily driven by an increase in state tax rates, which was offset by excess tax benefits from stock-based compensation.

As of December 31, 2022, the balance of unrecognized tax benefits was $87.7 million which is included in “Accounts payable and accrued expenses” on the consolidated balance sheet, $11.6 million of which, if recognized, would favorably affect the effective tax rate in the period of recognition. We had $44.1 million of unrecognized tax benefits as of December 31, 2021. We believe that we have adequately accounted for any material tax uncertainties in our existing reserves for all open tax years.

Our U.S. tax returns are subject to examination by federal and state taxing authorities. The statute of limitations related to our consolidated Federal income tax returns is closed for all tax years up to and including 2018. However, the 2014 tax year is still open to the extent of the net operating loss which we carried back from the 2019 tax return. The years open to examination by state, local and foreign government authorities vary by jurisdiction, but the statute of limitation is generally three years from the date the tax return is filed. For jurisdictions that have generated net operating losses, carryovers may be subject to the statute of limitations applicable for the year those carryovers are utilized. In these cases, the period for which the losses may be adjusted will extend to conform with the statute of limitations for the year in which the losses are utilized. In most circumstances, this is expected to increase the length of time that the applicable taxing authority may examine the carryovers by one year or longer, in limited cases.

LIQUIDITY AND CAPITAL RESOURCES

Capital Funding Strategy

We seek to maintain a stable and flexible balance sheet to ensure that liquidity and funding are available to meet our business obligations. As of December 31, 2022, we had cash, cash equivalents, and restricted cash of $178.4 million, of which $78.2 million was restricted, compared to $225.9 million, of which $60.4 million was restricted, as of December 31, 2021. During the three months ended March 31, 2022, we increased the borrowing capacity on four of our loan securitization facilities without having to increase any of the respective borrowing rates. In June 2022, we entered into a new $420.0 million loan securitization facility and increased the aggregate principal on our existing secured revolving credit agreement while extending its term. In October 2022, we entered into a new $125 million loan securitization facility. In November 2022, we amended two securitization facilities which resulted in a net increase to our funding capacity of $26.0 million and expanded the eligibility requirements to include more of our loans. As of December 31, 2022, we had funding capacity of $533.1 million. Based on numerous stressed-case modeling scenarios, we believe we have sufficient liquidity to run our operations for the foreseeable future. Further, we have no recourse debt obligations due until September 2024. As part of our capital and liquidity management, we may from time to time acquire our outstanding debt securities, including through redemptions, tender offers, open market purchases, negotiated transactions or otherwise, in accordance with applicable securities laws and in compliance with the indentures governing our outstanding debt securities, upon such terms and at such prices as we may determine.

Historically, we have generated significant cash flow through normal operating activities for funding both long-term and short-term needs. Our near-term liquidity is managed to ensure that adequate resources are available to fund our seasonal working capital growth, which is driven by demand for our loan and financing products. On September 1, 2017, we issued and sold $250.0 million in aggregate principal amount of 8.50% Senior Notes due 2024 (the “2024 Senior Notes”) and used the net proceeds, in part, to retire $155.0 million in existing indebtedness. On September 19, 2018, we issued and sold $375.0 million in aggregate principal amount of 8.50% Senior Notes due 2025 (the “2025 Senior Notes”) and used the net proceeds, in part, to retire existing indebtedness.

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On June 30, 2017, we entered into a secured revolving credit agreement (as amended, the “Credit Agreement”). On June 23, 2022, we entered into an amendment and restatement of our Credit Agreement that, among other things, increased the borrowing capacity to $440.0 million, with a $20.0 million letter of credit sublimit and $10.0 million swingline loan sublimit. The Credit Agreement bears interest, at our option, at the base rate plus 0.75% or the Secured Overnight Financing Rate plus 3.50%. In addition to customary fees for a credit facility of this size and type, the Credit Agreement provides for payment of a commitment fee calculated with respect to the unused portion of the commitment, and ranges from 0.15% per annum to 0.50% per annum depending on usage. The Credit Agreement contains certain prepayment penalties if it is terminated on or before the first and second anniversary dates, subject to certain exceptions. The Credit Agreement matures on June 30, 2026. As of February 22, 2023, our available borrowings under the Credit Agreement were $130.3 million. Since 2016, we have entered into several loan securitization facilities and offered asset-backed notes to fund our growth, primarily in our near-prime consumer installment loan and small business loan businesses. As of February 22, 2023, we had funding capacity of $363.8 million. We expect that our operating needs, including satisfying our obligations under our debt agreements and funding our working capital growth, will be satisfied by a combination of cash flows from operations, borrowings under the Credit Agreement, or any refinancing, replacement thereof or increase in borrowings thereunder, and securitization or sale of loans and finance receivables under our consumer and small business loan securitization facilities.

As of December 31, 2022, we were in compliance with all financial ratios, covenants and other requirements set forth in our debt agreements. Unexpected changes in our financial condition or other unforeseen factors may result in our inability to obtain third-party financing or could increase our borrowing costs in the future. To the extent we experience short-term or long-term funding disruptions, we have the ability to adjust our volume of lending and financing to consumers and small businesses that would reduce cash outflow requirements while increasing cash inflows through repayments. Additional alternatives may include the securitization or sale of assets, increased borrowings under the Credit Agreement, or any refinancing or replacement thereof, and reductions in capital spending which could be expected to generate additional liquidity.

Capital

Our Total stockholders' equity increased by $93.0 million to $1,186.1 million at December 31, 2022 from $1,093.1 million at December 31, 2021. The increase of stockholders' equity was driven primarily by net income for the year ended December 31, 2022, partially offset by $143.1 million in repurchases of our common stock. Our book value per share outstanding increased to $37.99 at December 31, 2022 from $32.01 at December 31, 2021, which was primarily driven by net income and share repurchases in 2022 .

On February 9, 2022, we announced the Board of Directors authorized a new share repurchase program totaling $100.0 million through June 30, 2023 (the "February 2022 Authorization"). On November 7, 2022, we announced the Board of Directors authorized an increase to our share repurchase program of up to $150.0 million through December 31, 2023 (the "November 2022 Authorization"). The November 2022 Authorization will go into effect when the February 2022 Authorization is exhausted. Repurchases under our repurchase programs will be made in accordance with applicable securities laws from time to time in the open market, through privately negotiated transactions or otherwise. The share repurchase program does not obligate us to purchase any shares of our common stock. The authorization for the share repurchase programs may be terminated, increased or decreased by the Board of Directors in its discretion at any time. During 2022, we paid $137.6 million to repurchase common stock under the share repurchase programs.

Cash

At December 31, 2022, we had $100.2 million of available unrestricted cash to fund our future operations compared to approximately $165.5 million at December 31, 2021.

Our cash and cash equivalents at December 31, 2022 were held primarily for working capital purposes and were used to fund a portion of our lending activities. From time to time, we use excess cash and cash equivalents to fund our lending activities. We do not enter into investments for trading or speculative purposes. Our policy is to invest cash in excess of our immediate working capital requirements in short-term investments, deposit accounts or other arrangements designed to preserve the principal balance and maintain adequate liquidity. Our excess cash may be invested primarily in overnight sweep accounts, money market instruments or similar arrangements that provide competitive returns consistent with our polices and market conditions.

Our restricted cash primarily consists of funds held in accounts as reserves on certain debt facilities and as collateral for issuing bank partner transactions. We have no ability to draw on such funds as long as they remain restricted under the applicable arrangements but have the ability to use these funds to finance loan originations, subject to meeting borrowing base requirements. Our policy is to invest restricted cash held in debt facility related accounts, to the extent permitted by such debt facility, in investments designed to preserve the principal balance and provide liquidity. Accordingly, such cash is invested primarily in money market instruments that offer daily purchase and redemption and provide competitive returns consistent with our policies and market conditions.

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Current Debt Facilities

The following table summarizes our debt facilities as of December 31, 2022.

Funding Debt:

Corporate Debt:

(a)

The weighted average interest rate is determined based on the rates and principal balances on December 31, 2022. It does not include the impact of the amortization of deferred loan origination costs or debt discounts.

(b)

The period during which new borrowings may be made under this facility expires in March 2025.

(c)

The period during which new borrowings may be made under this facility expires in July 2023.

(d)

The period during which new borrowings may be made under this facility expires in October 2024.

(e)

The period during which new borrowings may be made under this facility expires in November 2023.

(f)

The period during which new borrowings may be made under this facility expires in June 2024.

(g)

The period during which new borrowings may be made under this facility expires in November 2024.

(h)

The period during which new borrowings may be made under this facility expires in April 2024.

(i)

We had outstanding letters of credit under the Revolving line of credit of $0.8 million as of December 31, 2022.

Our ability to fully utilize the available capacity of our debt facilities may also be impacted by provisions that limit concentration risk and eligibility.

Cash Flows

Our cash flows and other key indicators of liquidity are summarized as follows (dollars in thousands):

Year Ended December 31,

Cash flows provided by (used in) operating activities

Cash flows from operating activities - discontinued operations — — (300 )

Cash flows (used in) provided by investing activities

Other investing activities — 25 168

Total debt to Adjusted EBITDA (a) 5.1 x 2.9 x 2.3 x

(a)

Total debt to Adjusted EBITDA, a non-GAAP measure, is calculated using Adjusted EBITDA for the twelve months ended for the respective period indicated. See “—Non-GAAP Financial Measures—Adjusted EBITDA.”

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Cash Flows from Operating Activities

Net cash provided by operating activities increased $422.1 million, or 89.5%, to $894.0 million for 2022 from $471.9 million for 2021. The increase was driven primarily by additional interest and fee income from growth in the loan portfolio, particularly since mid-2021. Net cash provided by operating activities for 2021 was abnormally low due to the strategic reduction in originations implemented at the onset of the COVID-19 pandemic.

We believe cash flows from operations and available cash balances and borrowings under our securitization facilities and Credit Agreement, which may include increased borrowings under our Credit Agreement, any refinancing or replacement thereof, and additional securitization of consumer and small business loans, will be sufficient to fund our future operating liquidity needs, including to fund our working capital growth.

Cash Flows from Investing Activities

Net cash flows used in investing activities increased $685.9 million, or 70.0%, for 2022 compared to 2021, due primarily to a $707.9 million increase in net cash used in loans and finance receivables, due to a 46.0% increase in loans and finance receivables originated or purchased and a 31.0% increase in loans and finance receivables repaid.

Cash Flows from Financing Activities

Net cash provided by financing activities in 2022 was $724.9 million compared to $365.1 million used in financing activities in 2021. Cash flows provided by financing activities for 2022 primarily reflects net borrowings of $109.0 million under the Credit Agreement and $762.2 million under our securitization facilities, partially offset by $143.1 million of cash used in treasury shares purchased, primarily under the share repurchase programs discussed above under “Capital”. Cash flows used in financing activities for 2021 primarily reflects $200 million of net borrowing under our Credit Agreement, $272.6 million of net borrowing under our securitization facilities, partially offset by $116.7 million of cash used in treasury shares purchased, primarily under the share repurchase programs.

CRITICAL ACCOUNTING ESTIMATES

Loans and Finance Receivables

Beginning January 1, 2020, we have elected the fair value option for our loans and finance receivables. We estimate the fair value of our loans and finance receivables primarily using discounted cash flow analyses at an individual loan level to more accurately predict future payments. We adjust contractual cash flows for estimated losses, prepayments and servicing costs over the estimated duration of the underlying assets and discount the future cash flows using a rate of return that we believe a market participant would require. Model results may be adjusted by management if we do not believe the output reflects the fair value of the portfolio, as defined under U.S. GAAP. The models are updated at each measurement date to capture any changes in internal factors such as nature, term, volume, payment trends, remaining time to maturity, and portfolio mix, as well as changes in underwriting or observed trends expected to impact future performance. We have validated model performance by comparing past valuations with actual performance noted after each valuation.

The following describes the primary inputs to the discounted cash flow analyses that require significant judgment:

•

Net losses – Net losses are estimates of the principal payments that will not be repaid over the life of our portfolio, net of the expected principal recoveries on charged-off receivables. We have developed proprietary underwriting systems based on data we have collected since the Company’s inception. These systems employ advanced risk analytics to decide whether to approve financing transactions, to structure the amount and terms of the financings we offer pursuant to jurisdiction-specific regulations, and to provide customers with funds quickly and efficiently. Our systems closely monitor collection and portfolio performance data that we use to continually refine the analytical models and statistical measures used in making our credit, purchase, marketing, and collection decisions. Leveraging the data at the core of our business, we utilize our models to estimate lifetime credit losses for loans and finance receivables. Inputs to the models include contractual cash flows, customer application information, historical and current performance, and behavioral information. Management may also incorporate discretionary adjustments based on our expectations of future credit performance.

•

Prepayments – Prepayments are estimates of the amount of principal payments that will occur earlier than contractually required during the life of a loan and finance receivable. Prepayments accelerate the timing of principal repayment and reduce interest payments. Prepayment rates in our discounted cash flow models are developed using historical results as the basis. Model inputs are similar to those utilized to estimate net losses and may also incorporate discretionary adjustments based on our expectations of future performance.

•

Utilization – Utilization is the rate that a line of credit is utilized in proportion to the borrowing limit. Utilization rates in our discounted cash flow model for the OnDeck line of credit product are developed using historical results as the basis and are

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used to estimate future draws on the line. Model inputs are similar to those utilized to estimate net losses and may also incorporate discretionary adjustments based on our expectations of future activity.

•

Servicing costs – Servicing costs applied to the expected cash flows of our portfolio reflect our estimate of the amount investors would incur to service the underlying assets for the remainder of their lives. Servicing costs are derived from our internal analysis of our cost structure considering the characteristics of our receivables and have been benchmarked against observable information on comparable assets in the marketplace.

•

Discount rates – Determined at a product level, the discount rates utilized in our cash flow analyses reflect our estimates of the rates of return that investors would require when investing in financial instruments with similar risk and return characteristics.

Management continuously monitors factors that may impact the fair values of its products. Internal factors such as portfolio composition (for example, interest rate, loan term, geography information, customer mix, credit quality) and performance (e.g., delinquency, loss trends, prepayment rates) are reviewed on a regular basis at various levels, including product and vintage. The Company also weighs the impact of relevant, internal business decisions on estimated fair value. External factors such as macroeconomic trends, financial market liquidity expectations, competitive landscape and legal or regulatory requirements are also reviewed on a regular basis. Management also reviews the results of its fair value model output compared to prior periods for unusual trends, potential model over- or under-reaction, outlier results and other distorting factors. Based on these analyses, management may deem it appropriate to adjust model output to derive management’s best estimate of fair value.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. In accordance with Accounting Standards Codification (“ASC”) 350, Goodwill, we test goodwill for potential impairment annually and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount.

We have historically performed our annual goodwill impairment test as of June 30 each year. During the year ended December 31, 2021, we voluntarily changed our annual impairment assessment date from June 30 to October 1 to better align with our budgeting process and year end as well as to include nearly a full year of results after our October 2020 acquisition of OnDeck, which was a material change to our financial position and results of operations. We believe the change in goodwill impairment testing date does not represent a material change to our method of applying an accounting principle in light of our internal controls and requirements to assess goodwill impairment upon certain triggering events.

We first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. In assessing the qualitative factors, we consider relevant events and circumstances including but not limited to macroeconomic conditions, industry and market environment, our overall financial performance, cash flow from operating activities, market capitalization and stock price. If we determine that the quantitative impairment test is required, we use the income approach to complete our annual goodwill assessment. The income approach uses future cash flows and estimated terminal values that are discounted using a market participant perspective to determine the fair value, which is then compared to the carrying value to determine if there is impairment. The income approach includes assumptions about revenue growth rates, operating margins and terminal growth rates discounted by an estimated weighted-average cost of capital derived from other publicly-traded companies that are similar from an operational and economic standpoint. See Note 5, Goodwill and Other Intangible Assets, to the Consolidated Financial Statements.

Income Taxes

We account for income taxes under ASC 740, Income Taxes. As part of the process of preparing our consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating the actual current tax expense together with assessing temporary differences in recognition of income for tax and accounting purposes. These differences result in deferred tax assets and liabilities and are included within the consolidated balance sheets. We must then assess the likelihood that the deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not more likely than not, we must establish a valuation allowance. An expense or benefit is included within the tax provision in the consolidated statement of income for any increase or decrease in the valuation allowance for a given period.

We report our loans and finance receivables in the Company’s tax returns at fair market value, as determined for U.S. federal income tax purposes, which differs from how we report them in the consolidated financial statements due in part to statutory tax and judicial principles that may lead to different interpretations of expected credit losses and discount rate assumptions. Changes in the fair market value of our loans and finance receivables as determined for tax purposes may have a significant impact on the timing and amount of how income taxes are recognized in the consolidated financial statements. The estimates of fair market value are dependent on multiple assumptions, including expected credit losses and discount rates.

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We perform an evaluation of the recoverability of our deferred tax assets on a quarterly basis. We establish a valuation allowance if it is more-likely-than-not (greater than 50 percent) that all or some portion of the deferred tax asset will not be realized. We analyze several factors, including the nature and frequency of operating losses, our carryforward period for any losses, the reversal of future taxable temporary differences, the expected occurrence of future income or loss and the feasibility of available tax planning strategies to protect against the loss of deferred tax assets.

We account for uncertainty in income taxes in accordance with ASC 740, which requires that a more-likely-than-not threshold be met before the benefit of a tax position may be recognized in the consolidated financial statements and prescribes how such benefit should be measured. We must evaluate tax positions taken on our tax returns for all periods that are open to examination by taxing authorities and make a judgment as to whether and to what extent such positions are more likely than not to be sustained based on the technical merits. We record interest and penalties related to tax matters as income tax expense in the consolidated statement of income.

Our judgment is required in determining the provision for income taxes, the deferred tax assets and liabilities and any valuation allowance recorded against deferred tax assets. Our judgment is also required in evaluating whether tax benefits meet the more-likely-than-not threshold for recognition under ASC 740.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Refer to Note 1 in the Notes to the Consolidated Financial Statements in Part II, Item 8 “Financial Statements and Supplementary Data” in this report for a discussion of recently issued accounting pronouncements that may be significant to Enova.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is a broad term related to economic losses due to adverse changes in the fair value of a financial instrument. While market risk may embody several elements, including liquidity and basis risk, the SEC’s market risk rules focus on pricing risk, which relates to changes in the level of prices due to changes in interest rates, foreign currency exchange rates, commodity prices, equity prices, and other market changes that affect market risk-sensitive instruments.

We carry our loans and finance receivables at fair value with changes in fair value recognized directly in earnings. The valuation of our loan portfolio may be impacted by macroeconomic and other factors that may positively or negatively impact the repayment capacity of our customers or the discounted value of expected future cash flows from our loan portfolio.

Changes to market interest rates can impact the fair value of our loans and finance receivables. The fair value of our loans and receivables are estimated using a discounted cash flow methodology, where the discount rate represents an estimate of the required rate of return by market participants. Required returns may increase or decrease depending upon the level of market interest rates and additional risk premiums required to generate acceptable returns on specific assets. An increase of 100 basis points to the discount rates used in our valuations would decrease the balance of loans and finance receivables at fair value by approximately 0.7% at December 31, 2022 and 2021. A decrease of 100 basis points to the discount rates used in our valuations would increase the balance of Loans and finance receivables at fair value by approximately 0.7% at December 31, 2022 and 2021.

Expectations of future credit losses are a significant input to the valuation of our loans and finance receivables. A variety of macroeconomic and other factors can impact the expected repayment capacity of our customers and our expectation of future credit losses, both positively and negatively. Increasing our estimates for future credit losses used in our valuations to 110% of current expectations would decrease the balance of loans and finance receivables at fair value by approximately 3.2% and 4.1% at December 31, 2022 and 2021, respectively. Conversely, credit losses may decrease as the economy strengthens or with increased government assistance. Decreasing our estimates for future credit losses used in our valuations to 90% of current expectations would increase the balance of loans and finance receivables at fair value by approximately 3.3% and 4.0% at December 31, 2022 and 2021, respectively.

The expected rate of future customer prepayments can also impact the fair value of our loans and finance receivables. Prepayment speeds can vary with economic activity, competition and other factors that may increase or decrease the liquidity available to our customers to prepay obligations. Increasing our estimates for future prepayments used in our valuations to 110% of current expectations would decrease the balance of Loans and finance receivables at fair value by 0.9% and 1.2% at December 31, 2022 and 2021, respectively. Conversely, prepayment speeds may decrease as the economy weakens or inflation increases. Decreasing our estimates for future prepayments used in our valuations to 90% of current expectations would increase the balance of Loans and finance receivables at fair value by 0.8% and 1.2% at December 31, 2022 and 2021, respectively.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

Notes to Consolidated Financial Statements 71

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Enova International, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Enova International, Inc. and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows, for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022 and 2021, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Loans and finance receivables at fair value – Refer to Notes 1 and 18 to the consolidated financial statements

Critical Audit Matter Description

The estimation of the fair value of loans and finance receivables portfolio uses discounted cash flow models that have been internally developed. The models use inputs that are unobservable and inherently judgmental and reflect management’s best estimates of the assumptions a market participant would use to calculate fair value. The valuation inputs for the projections of future cash flows include estimated losses, prepayment rates, utilization rates, servicing costs and discount rates.

We identified loans and finance receivables at fair value as a critical audit matter because of the subjective process in determining significant inputs and judgments used to estimate the fair value. Given management’s use of unobservable inputs to estimate the fair value of the loans and finance receivables, performing audit procedures to evaluate these inputs requires a high degree of auditor judgment and an increased extent of effort, including the need to involve our internal fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to loans and finance receivables at fair value included the following, among others:

•

We tested the effectiveness of internal controls related to the determination of loans and finance receivables at fair value, including those controls related to the significant inputs used to estimate the fair value.

•

We tested the underlying data, including historical loan data and other assumptions, that served as the basis for the valuation.

•

We assessed the consistency by which management has applied significant unobservable valuation assumptions.

•

With the assistance of our internal fair value specialists, we developed a range of independent estimates of fair value and compared our estimates to the recorded valuation.

/s/ Deloitte & Touche LLP

Chicago, IL

February 24, 2023

We have served as the Company's auditor since 2021.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Enova International, Inc.

Opinion on the Financial Statements

We have audited the consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows of Enova International, Inc. and its subsidiaries (the “Company”) for the year ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for loans and finance receivables in 2020.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

February 26, 2021

We served as the Company’s auditor from 2011 to 2021.

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ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

December 31,

Assets

Liabilities and Stockholders' Equity

Commitments and contingencies (Note 11)

Stockholders' equity:

Accumulated other comprehensive loss (5,990 ) (8,540 )

(1)

Includes amounts in consolidated variable interest entities (“VIEs”) presented separately in the table below.

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ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

The following table presents the aggregated assets and liabilities of consolidated VIEs, which are included in the Consolidated Balance Sheets above. The assets in the table below may only be used to settle obligations of consolidated VIEs and are in excess of those obligations. See Note 15 for additional information.

December 31,

Assets of consolidated VIEs, included in total assets above

Cash and cash equivalents $ 420 $ 420

Other receivables and prepaid expenses 17,413 6,378

Liabilities of consolidated VIEs, included in total liabilities above

Accounts payable and accrued expenses $ 7,528 $ 2,061

See Notes to Consolidated Financial Statements

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ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

Year Ended December 31,

Operating Expenses

Foreign currency transaction (loss) gain, net (645 ) (382 ) 514

Gain on bargain purchase — — 163,999

Less: Net income attributable to noncontrolling interest — 773 85

Net loss from discontinued operations — — (300 )

Earnings (Loss) Per Share attributable to Enova International, Inc.:

Earnings (loss) per common share – basic:

Discontinued operations — — (0.01 )

Earnings (loss) per common share – basic $ 6.42 $ 7.05 $ 11.85

Earnings (loss) per common share – diluted:

Discontinued operations — — (0.01 )

Earnings (loss) per common share – diluted $ 6.19 $ 6.79 $ 11.70

Weighted average common shares outstanding:

See Notes to Consolidated Financial Statements

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ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

Year Ended December 31,

Other comprehensive (loss) gain, net of tax:

Foreign currency translation (loss) gain(1) 789 (1,478 ) (3,832 )

Ownership change in noncontrolling interest — (270 ) —

Unrealized gain on investments, net of tax 1,761 — —

OnDeck Australia deconsolidation — 106 —

Total other comprehensive (loss) gain, net of tax 2,550 (1,642 ) (3,832 )

Net income attributable to noncontrolling interest — (773 ) (85 )

Ownership change in noncontrolling interest — 802 —

(1)

Net of tax benefit (provision) of $(209), $513 and $1,830 for the years ended December 31, 2022, 2021 and 2020, respectively.

See Notes to Consolidated Financial Statements

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ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

Total Enova

Accumulated International,

Additional Other Inc. Total

Shares Amount Capital Earnings Loss Shares Amount Equity Interest Equity

Shares issued for vested RSUs 589 — — — — — — — — —

Shares issued for stock option exercises 17 — 189 — — — — 189 — 189

Net income attributable to noncontrolling interest — — — — — — — — 85 85

Shares issued for vested RSUs 793 — — — — — — — — —

Net income attributable to noncontrolling interest — — — — — — — — 773 773

Ownership change in noncontrolling interest — — 1,072 — (270 ) — — 802 (802 ) —

Shares issued for vested RSUs 640 — — — — — — — — —

Unrealized gain on investments, net of tax — — — — 1,761 — — 1,761 — 1,761

Foreign currency translation gain, net of tax — — — — 789 — — 789 — 789

See Notes to Consolidated Financial Statements

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ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Year Ended December 31,

Cash Flows from Operating Activities

Less: Net loss from discontinued operations — — 300

Amortization of deferred loan costs and debt discount 5,698 6,224 12,699

Gain on bargain purchase — — (163,999 )

Loss on sale of subsidiary 4,388 842 —

Incomplete transaction costs 710 — —

Loss on early extinguishment of debt — 378 827

Lease termination and cease-use costs — (6,311 ) —

Changes in operating assets and liabilities:

Other receivables, prepaid expenses and other assets (24,335 ) (7,222 ) (5,601 )

Cash flows from operating activities - discontinued operations — — (300 )

Cash Flows from Investing Activities

Other investing activities — 25 168

Cash Flows from Financing Activities

Debt prepayment penalty paid — — (827 )

Effect of exchange rates on cash (77 ) 34 (244 )

See Notes to Consolidated Financial Statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Significant Accounting Policies

Nature of the Company

Enova International, Inc. (“Enova”), formed on September 7, 2011, is an independent, publicly traded company, and the Company’s shares of common stock are listed on the New York Stock Exchange under the symbol “ENVA.” Enova and its subsidiaries (individually and collectively referred to herein as the “Company”) operate an internet-based lending platform to serve customers in need of cash to fulfill their financial responsibilities. Through a network of direct and indirect marketing channels, the Company offers funds to its customers through a variety of loan and finance receivable products that are primarily unsecured. The business is operated primarily through the internet to provide convenient, fully-automated financial solutions to its customers. As of December 31, 2022, the Company offered or arranged loans to consumers under the names “CashNetUSA” and “NetCredit” in 37 states in the United States and under the name “Simplic” in Brazil. The Company also offered financing to small businesses in all 50 states and Washington D.C. in the United States under the names “OnDeck,” “Headway Capital” and “The Business Backer.”

The Company originates, guarantees or purchases consumer loans. Consumer loans provide customers with cash in their bank account, typically in exchange for an obligation to repay the amount advanced plus fees and/or interest. Consumer loans includes installment loans and line of credit accounts. The Company provides financing to small businesses through either installment loans, a receivables purchase agreement product (“RPAs”) or a line of credit account. RPAs represent a right to receive future receivables from a small business. Small businesses receive funds in exchange for a portion of the business’ future receivables at an agreed upon discount. In contrast, lending is a commitment to repay principal and interest. “Loans and finance receivables” include consumer loans, small business loans and RPAs.

Installment loans are loans written by the Company, by a third-party lender through the Company’s credit services organization and credit access business programs (“CSO programs” as further described below) that the Company guarantees or by a bank partner. Installment loans includes longer-term loans that require the outstanding principal balance to be paid down in multiple installments. Line of credit accounts include draws made through the Company’s line of credit products.

Through the Company’s CSO programs, the Company provides services related to a third-party lender’s consumer loan products in some markets by acting as a credit services organization or credit access business on behalf of consumers in accordance with applicable state laws. Services offered under the CSO programs include credit-related services such as arranging loans with independent third-party lenders and assisting in the preparation of loan applications and loan documents (“CSO loans”). Under the CSO programs, the Company guarantees consumer loan payment obligations to the third-party lender in the event that the customer defaults on the loan, at which point, the loan is purchased by the Company. Prior to any potential purchase, CSO loans are not included in the Company’s consolidated balance sheets.

The Company operates programs with certain banks to provide marketing services and loan servicing for near-prime unsecured consumer installment loans and, beginning in January 2021, line of credit accounts. Under the programs, the Company receives marketing and servicing fees while the bank receives an origination fee. The bank has the ability to sell and the Company has the option, but not the requirement, to purchase the loans the bank originates and, in the case of line of credit accounts, a participation interest in those accounts. The Company does not guarantee the performance of the loans and line of credit accounts originated by the bank. As part of the OnDeck business both prior and subsequent to Enova’s acquisition, OnDeck operates a program with a separate bank to provide marketing services and loan servicing for small business installment loans and line of credit accounts. Under the OnDeck program, the Company receives marketing fees while the bank receives origination fees and certain program fees. The bank has the ability to sell and the Company has the option, but not the requirement, to purchase the installment loans that the bank originates and, in the case of line of credit accounts, extensions under those line of credit accounts. The Company does not guarantee the performance of the loans originated by the bank.

Through the acquisition of Pangea, which is described in more detail in Note 2 to the consolidated financial statements, the Company now operates a money transfer platform that allows customers to send money from the United States to Mexico, other Latin American countries and Asia. Revenue is generated through fees per transfer and an exchange rate spread.

Basis of Presentation

The consolidated financial statements of the Company included herein have been prepared on the basis of accounting principles generally accepted in the United States (“GAAP”) and reflect the historical results of operations and cash flows of the Company during each respective period. The consolidated financial statements include goodwill and intangible assets arising from businesses previously acquired. The financial information included herein may not be indicative of the consolidated financial position, operating results, changes in stockholders’ equity and cash flows of the Company in the future. Intercompany transactions are eliminated. Certain prior year amounts have been reclassified to conform to current year presentation.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company consolidates any variable interest entity (“VIE”) where it has determined the Company is the primary beneficiary. The primary beneficiary is the entity which has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance as well as the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE.

With the acquisition of OnDeck, the Company owned a 55% controlling interest in On Deck Capital Australia PTY LTD (“OnDeck Australia”). The remaining interests were owned by an unrelated third party. Prior to December 2021, we consolidated the financial position and results of operations of this entity under the voting interest model. The noncontrolling interest, which is presented as a separate component of consolidated equity, represented the minority owners' proportionate share of the equity of the entity and was adjusted for the minority owners' share of the earnings, losses, investments and distributions. Refer to "Investments in Unconsolidated Investees" later in this note for discussion of the partial divestiture in December 2021 that triggered the deconsolidation of OnDeck Australia.

On October 25, 2019, the Company’s U.K. businesses were placed into administration, which resulted in treatment of the businesses as discontinued operations for all periods presented. Throughout these consolidated financial statements, unless otherwise noted, current and prior year financial information is presented as if the U.K. businesses were excluded from continuing operations as required. For further information about the placement of the segment into administration, refer to “Discontinued Operations” below.

Use of Estimates

The preparation of these consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, fair value of loans and finance receivables, goodwill, long-lived and intangible assets, income taxes, contingencies and litigation. Management bases its estimates on historical experience, empirical data and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates.

Foreign Currency Translations

The functional currencies for the Company’s subsidiaries that serve or have served residents of Australia and Brazil are the Australian dollar and the Brazilian real, respectively. The assets and liabilities of these subsidiaries are translated into U.S. dollars at the exchange rates in effect at each balance sheet date, and the resulting adjustments are recorded in “Accumulated other comprehensive income (loss)” (“AOCI”) as a separate component of stockholders’ equity. Revenue and expenses are translated at the monthly average exchange rates occurring during each period.

In December 2021, the Company sold a portion of its interest in OnDeck Australia and, as a result, deconsolidated it from the Company's consolidated financial statements. In conjunction with the deconsolidation, the AOCI balances related to OnDeck Australia were reversed out and included in the calculation of loss on divestiture. Refer to "Investments in Unconsolidated Investees" section later in this note for additional discussion of the divestiture.

Discontinued Operations

Beginning in 2007, the Company provided services in the United Kingdom under various brands, including QuickQuid, Pounds to Pocket and On Stride. Due in part to the level of claim and legal settlement costs incurred in conducting our U.K. business and unsuccessful discussions with U.K regulators, on October 24, 2019, the Company announced its intent to exit the U.K. market. On October 25, 2019, Grant Thornton LLP, a licensed U.K. insolvency practitioner, was appointed as administrators (“Administrators”) to take control of management of the U.K. businesses. The effect of the U.K. businesses’ entry into administration was to place their management, affairs, business and property under the direct control of the Administrators. Accordingly, the Company deconsolidated its U.K. businesses as of October 25, 2019 and is presenting them as discontinued operations for all periods presented in these consolidated financial statements. The Company recorded a one-time after-tax charge of $74.5 million, including one-time cash charges of $52.2 million, as a result of placing the U.K. businesses into administration. During the year ended December 31, 2020, the Company recorded an impairment charge of $0.4 million ($0.3 million net of taxes) to write down a receivable on certain expenses incurred by the Company prior to administration that were deemed non-reimbursable by the Administrators.

The Company entered into a service agreement with the Administrators under which the Company provides certain administrative, technical and other services in exchange for compensation by the Administrators. The agreement expired July 8, 2022 and was not

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

extended beyond that date. During the years ended December 31, 2022, 2021 and 2020, the Company recorded $0.5 million, $2.8 million and $5.0 million, respectively, in revenue related to these services. As of December 31, 2022, the Company did not have any outstanding receivable or payable balances with the Administrators. As of December 31, 2021, the Administrators owed the Company $0.5 million, related to services provided.

Cash and Cash Equivalents

The Company considers deposits in banks and short-term investments with original maturities of 90 days or less as cash and cash equivalents.

Restricted Cash

The Company includes funds to be used for future debt payments relating to its securitization transactions and escrow deposits in restricted cash and cash equivalents.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheets (in thousands):

December 31,

Revenue Recognition

The Company recognizes revenue based on the financing products and services it offers and on loans it acquires. “Revenue” in the consolidated statements of income includes: interest income, finance charges, fees for services provided through the Company’s CSO programs (“CSO fees”), revenue on RPAs, service charges, draw fees, minimum billing fees, purchase fees, origination fees, late fees and non-sufficient funds fees as permitted by applicable laws and pursuant to the agreement with the customer. Interest is generally recognized on an effective yield basis over the contractual term of the loan on installment loans, the estimated outstanding period of the draw on line of credit accounts, or the projected delivery term on RPAs. CSO fees are recognized over the term of the loan. Late and nonsufficient funds fees are recognized when assessed to the customer.

Prior to the adoption of the fair value option effective January 1, 2020, origination fees as well as certain direct costs associated with originating loans were deferred and amortized into or against revenue on an effective yield basis over the term of the loan or the projected delivery term of the finance receivable. Subsequent to the election of the fair value option, these fees and costs are no longer eligible for deferral. As such, origination fees on installment loans, purchase fees on RPAs, and draw fees on line of credit accounts are recognized when assessed to the customer.

Loans and Finance Receivables

The Company utilizes the fair value option on its entire loan and finance receivable portfolio. As such, loans and finance receivables are carried at fair value in the consolidated balance sheet with changes in fair value recorded in the consolidated income statement. To derive the fair value, the Company generally utilizes discounted cash flow analyses that factor in estimated losses, prepayments, utilization rates and servicing costs over the estimated duration of the underlying assets. Loss, prepayment, utilization and servicing cost assumptions are determined using historical loss data and include appropriate consideration of recent trends and anticipated future performance. Future cash flows are discounted using a rate of return that the Company believes a market participant would require. Accrued and unpaid interest and fees are included in “Loans and finance receivables” in the consolidated balance sheets.

Prior to January 1, 2020, the Company carried its loans and finance receivables at amortized cost, less an allowance for estimated losses and unamortized net deferred origination costs. In determining the allowance, the Company applied a documented systematic methodology generally at a product level. The factors the Company considered to assess the adequacy of the allowance included past due performance, historical behavior of monthly vintages, underwriting changes, delinquency status, payment history and recency factors.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Current and Delinquent Loans and Finance Receivables

The Company classifies its loans and finance receivables as either current or delinquent. Excluding OnDeck loans and finance receivables, when a customer does not make a scheduled payment as of the due date, that payment is considered delinquent, and the remainder of the receivable balance is considered current. If the customer does not make two consecutive payments, the entire account or loan is classified as delinquent and placed on a non-accrual status. For the OnDeck portfolio, a loan is considered to be delinquent when the daily or weekly payments are one day past due. Loans are placed in nonaccrual status and the accrual of interest income is stopped on loans that are delinquent and non-paying. Loans are returned to accrual status if they are brought to non-delinquent status or have performed in accordance with the contractual terms for a reasonable period of time and, in the Company’s judgment, will continue to make periodic principal and interest payments as scheduled. The Company allows for normal payment processing time before considering a loan delinquent but does not provide for any additional grace period.

Where permitted by law and as long as a loan is not considered delinquent, a customer may choose to renew or extend the due date on certain installment loans. In order to renew or extend a single-pay loan, a customer must agree to pay the current finance charge for the right to make a later payment of the outstanding principal balance plus an additional finance charge. In order to renew an installment loan, the customer enters into a new installment loan contract and agrees to pay the principal balance and finance charge in accordance with the terms of the new loan contract. If a single-pay loan is renewed, but the customer fails to pay that loan’s current finance charge as of the due date, the unpaid finance charge is classified as delinquent.

The Company offers certain forbearance options on its loan products with features such as payment deferrals without the incurrence of additional finance charges or late fees. If a loan is deemed to be current and the customer makes a deferral or payment modification, the loan is still deemed to be current until the next scheduled payment is missed.

The Company generally charges off loans and finance receivables between 60 and 65 days delinquent. If a loan or finance receivable is deemed uncollectible prior to this, it is charged off at that point. For the OnDeck portfolio, the Company generally charges off a loan when it is probable that that it will be unable to collect all of the remaining principal payments, which is generally after 90 days of delinquency and 30 days of non-activity. Loans and finance receivables classified as delinquent generally have an age of one to 64 days from the date any portion of the receivable became delinquent, as defined above. Recoveries on loans and finance receivables that were previously charged off are generally recognized when collected or sold.

Property and Equipment

Property and equipment is recorded at cost. The cost of property retired or sold and the related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in the consolidated statements of income. Costs associated with repair and maintenance activities are expensed as incurred. Depreciation expense is generally provided on a straight-line basis, using the following estimated useful lives:

Computer hardware and software 3 to 5 years

Furniture, fixtures and equipment 3 to 7 years

Leasehold improvements (1) 3 to 10 years

(1)

Leasehold improvements are depreciated over the lesser of the estimated useful life, remaining lease term, or 10 years.

Software Development Costs

The Company applies Accounting Standards Codification (“ASC”) 350-40, Internal Use Software (“ASC 350-40”), to its software purchase and development activities. Under ASC 350-40, eligible internal and external costs incurred for the development of computer software applications, as well as for upgrades and enhancements that result in additional functionality of the applications, are capitalized to “Property and equipment” on the consolidated balance sheets. Internal and external training and maintenance costs are charged to expense as incurred or over the related service period. When a software application is placed in service, the Company begins amortizing the related capitalized software costs using the straight-line method based on its estimated useful life, which generally ranges from three to five years.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. In accordance with ASC 350, Intangibles—Goodwill and Other (“ASC 350”), the Company tests goodwill

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

for potential impairment annually as of October 1 and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

The Company first assesses qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. In assessing the qualitative factors, management considers relevant events and circumstances including but not limited to macroeconomic conditions, industry and market environment, overall financial performance of the Company, cash flow from operating activities, market capitalization and stock price. If the Company determines that the quantitative impairment test is required, management uses the income approach to complete its annual goodwill assessment. The income approach uses future cash flows and estimated terminal values for the Company that are discounted using a market participant perspective to determine the fair value, which is then compared to the carrying value to determine if there is impairment. The income approach includes assumptions about revenue growth rates, operating margins and terminal growth rates discounted by an estimated weighted-average cost of capital derived from other publicly-traded companies that are similar but not identical from an operational and economic standpoint.

Long-Lived Assets Other Than Goodwill

An evaluation of the recoverability of property and equipment and intangible assets subject to amortization is performed whenever the facts and circumstances indicate that the carrying value may be impaired. An impairment loss is recognized if the future undiscounted cash flows associated with the asset and the estimated fair value of the asset are less than the asset’s corresponding carrying value. The amount of the impairment loss, if any, is the excess of the asset’s carrying value over its estimated fair value.

The Company amortizes intangible assets subject to amortization on the basis of their expected periods of benefit, generally three to 20 years. The costs of start-up activities and organization costs are charged to expense as incurred.

Investments in Unconsolidated Investees

In December 2021, the Company sold a portion of its interest in OnDeck Australia, recognizing a loss of $0.8 million that has been included in "Other nonoperating expense." Prior to this, the Company had consolidated the financial position and results of operations of OnDeck Australia under the voting interest model. Subsequent to the transaction, the Company owns a 20% equity interest in OnDeck Australia and no longer has control over the entity; as such, the Company has deconsolidated OnDeck Australia from its financial statements and now records its interest under the equity method of accounting. As of December 31, 2022 and 2021, the carrying value of the Company’s investment in OnDeck Australia was $1.1 million and $1.8 million, respectively, which the Company has included in “Other assets” on the consolidated balance sheets.

On February 24, 2021, the Company contributed the platform-as-service business assumed in the OnDeck acquisition to Linear Financial Technologies Holding LLC (“Linear”) in exchange for ownership units in that entity. The Company records its interest in Linear under the equity method of accounting. In 2022, the Company recognized a gain of $11.0 million related to the sale by Linear of its operating company. As of December 31, 2022 and 2021, the carrying value of the Company’s investment in Linear was $18.3 million and $5.6 million, respectively, which the Company has included in “Other assets” on the consolidated balance sheets.

With the acquisition of OnDeck, as discussed in Note 2, the Company obtained a 58.5% equity interest in On Deck Capital Canada Holdings, Inc. (“OnDeck Canada”). Despite holding a majority of the equity interest, the Company did not have a controlling financial interest as it did not hold a majority of the voting interest. As such, the Company utilized the equity method to account for its investment in OnDeck Canada in the Company’s consolidated financial statements. In the second quarter of 2022, the Company sold its remaining interest in OnDeck Canada, which resulted in a net loss of $4.4 million. As of December 31, 2021, the carrying value of the investment was $13.7 million, which the Company has included in “Other assets” on the consolidated balance sheets.

Equity method income has been included in “Equity method investment income” in the consolidated income statements.

The Company has an equity ownership position in an investment without a readily determinable value. In accordance with ASC 321, Investment – Equity Securities, the Company has elected to measure the investment at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. At each reporting date, the Company reassesses whether the investment still qualifies for this measurement alternative. Further, at each reporting date, the Company performs a qualitative assessment to evaluate whether the investment is impaired. If the qualitative assessment indicates that the investment is impaired and the fair value of the investment is less than its carrying value, the carrying amount of the investment will be reduced and the resulting loss recognized in net income in the period the impairment is identified. As of December 31, 2022 and 2021, the carrying value of the investment was $6.9 million, which the Company has included in “Other

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assets” on the consolidated balance sheets. As of December 31, 2022, the Company concluded that the measurement alternative was still appropriate and, as a result of its qualitative assessment, that an impairment charge was not warranted.

Marketing Expenses

Marketing expenses consist of digital costs, lead purchase costs and offline marketing costs such as television and direct mail advertising. All marketing expenses are expensed as incurred.

Operations and Technology Expenses

Operations and technology expenses include all expenses related to the direct operations and technology infrastructure related to loan underwriting and processing. This includes contact center and operations personnel costs, software maintenance expense, underwriting data from third-party vendors, bank and transaction fees and telephony costs.

General and Administrative Expenses

General and administrative expenses primarily include the Company’s corporate personnel costs, as well as legal, occupancy, and other related costs.

Stock-Based Compensation

The Company accounts for its stock-based employee compensation plans in accordance with ASC 718, Compensation—Stock Compensation (“ASC 718”). Under this guidance the fair value of share-based compensation is determined at the grant date and the recognition of the related expense is recorded over the period in which the share-based compensation vests. However, with respect to income taxes, the related deduction from taxes payable is based on the award’s intrinsic value at the time of exercise (for an option) or on the fair value upon vesting of the award (for restricted stock units), which can be either greater (creating an excess tax benefit) or less (creating a tax deficiency) than the deferred tax benefit that is recorded as compensation cost is recognized in the consolidated financial statements. Pursuant to Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), these excess tax benefits (deficiencies) are recognized in “Provision for income taxes” in the period that the tax deduction arises. In the consolidated statement of cash flows, they are classified in operating activities in the same manner as other cash flows related to income taxes.

Income Taxes

The provision for income taxes is based on income before income taxes as reported for financial statement purposes. Deferred income taxes are provided for in accordance with the asset and liability method of accounting for income taxes in order to recognize the tax effects of temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements.

The Company accounts for uncertainty in income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires that a more-likely-than-not threshold (greater than 50 percent) be met before the benefit of a tax position may be recognized in the consolidated financial statements and prescribes how such benefit should be measured. The Company records interest and penalties related to tax matters as income tax expense in the consolidated statements of income.

The Company performs an evaluation of the recoverability of its deferred tax assets on a quarterly basis. The Company establishes a valuation allowance if it is more likely than not that all or some portion of the deferred tax asset will not be realized. The Company analyzes several factors, including the nature and frequency of operating losses, the Company’s carryforward period for any losses, the reversal of future taxable temporary differences, the expected occurrence of future income or loss and the feasibility of available tax planning strategies to protect against the loss of deferred tax assets. See Note 10 for further discussion.

Earnings Per Share

Basic earnings per share is computed by dividing net income attributable to Enova International, Inc. by the weighted average number of common shares outstanding during the year. Diluted earnings per share is calculated by giving effect to the potential dilution that could occur if securities or other contracts to issue common shares were exercised and converted into common shares during the year. Restricted stock units issued under the Company’s stock-based employee compensation plans are included in diluted shares upon the granting of the awards even though the vesting of shares will occur over time.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth the reconciliation of numerators and denominators of basic and diluted earnings per share computations for the years ended December 31, 2022, 2021 and 2020 (in thousands, except per share amounts):

Year Ended December 31,

Numerator:

Net loss from discontinued operations — — (300 )

Denominator:

Shares applicable to stock-based compensation 1,193 1,385 405

Earnings per common share – basic:

Discontinued operations — — (0.01 )

Earnings per common share – basic $ 6.42 $ 7.05 $ 11.85

Earnings per common share – diluted:

Discontinued operations — — (0.01 )

Earnings per common share – diluted $ 6.19 $ 6.79 $ 11.70

For the years ended December 31, 2022, 2021 and 2020, 530,471, 142,758 and 2,052,307 shares of common stock underlying stock options, respectively, were excluded from the calculation of diluted net earnings per share because their effect would have been antidilutive. For the years ended December 31, 2022 and 2021, there were no shares and for the year ended December 31, 2020, there were 627,804 shares of common stock underlying restricted stock units that were excluded from the calculation of diluted net earnings per share because their effect would have been antidilutive.

2. Acquisitions